The Key To Buying Older Real Estate In Perth
The average West Australian home is about 30 years old. This is not too surprising, however it is unusual that around 40 per cent of our housing stock is roughly the same age and rapidly in need of upgrading. In many other Australian cities and towns, there is not the same volume of older house, due to the housing boom experience in Perth in the 1960s and 1970s.
Perth’s aging housing stock has created the momentum for large-scale redevelopment. There are also opportunities for Perth Real Estate investors to benefit from this by purchasing older properties suitable for redevelopment, renovation and re-sale, but you should check with your tax adviser firstly about property depreciation deductions on new expenditure.
Some homebuyers in Perth would not be accustomed to buying older properties that might need upgrading. For these people it is important to keep in mind that over time two things occur to most properties. While the land value increases the value of the property decreases. As the rate of land value increases, it will often outweigh the depreciation of the building, and so the value of the dwelling is close to the actual land value.
These ‘block value’ properties are keenly sought by investors because there is very little depreciation left in the dwelling to diminish from the on-going increase in the land value. Obviously, it is an added advantage if the property is in good enough condition to be still rentable.
Older properties are also good starter homes for first homebuyers in Perth. These buyers often start with a small deposit and it is important that they benefit, at an early stage, from swifter increases in the value of their property in order to build up equity to enable them to upgrade later on.
When you purchase an older home it is strongly advisable to undertake a professional building inspection and obtain a report on the structural soundness of the dwelling. Naturally there will be understandable wear and tear in an older home which is largely cosmetic and easily repaired. This should not be confused with structural soundness, which is more about the ‘bones’ of the home and usually means there is no significant detectable damage to the its main structure, including the foundations, walls, and the roof.
A building inspection should uncover more usual wear and tear and might include a worn-out solar hot water system, rusted gutters and broken tiles to more costly items like faulty electrical wiring.
From a buyer’s perspective it is important to firstly clarify the structural soundness of a property with any issues that arise being discussed in negotiations over the purchase. When inspecting a property, take note of any upgrades that might be necessary and which can be addressed at the buyer’s discretion.
HIgh Vacancy Rates In Perth Rental Market
New data on Perth Real Estate Rentals from the Real Estate Institute of Western Australia show that while the vacancy rate in Perth dropped slightly from 4.7 per cent in the December quarter to 4.1 per cent in March, the overall rental median is static at $370 per week.
REIWA President Alan Bourke said the slightly lower Perth Rental Real Estate vacancy rate was due to diminished stock and not to increased demand by tenants.
“What we are witnessing is that many investors who found it hard to sell in the last couple of years put their properties into the rental system to ride out the downturn.
“Now that things have improved, some owners are listing these dwellings for sale which accounts for the increased stock for sale and the lower vacancy rate,” Mr Bourke said.
Mr Bourke said this dynamic also helped to explain why rents were stable.
“Currently, there are no pressures that will increase demand and so cause Perth Real Estate rentals to increase dramatically, and typical rents in Perth have only increased by around $10 per week since the December quarter of 2008,” Mr Bourke said.
REIWA data show that the median rent for a house in Perth is $380 per week, up by a modest $5 on the December quarter, while the median rent for units, apartments, villas and townhouses was steady at $350 per week.
Despite no movement in Perth’s overall median rent, some sub-regions did experience rises and falls.
REIWA rental property data indicates rents grew by 6 per cent in the Bayswater-Bassendean region, to $350 per week, and also grew by 5.7 per cent in the north west region of Wanneroo ($370).
Conversely, rents fell by around 3 per cent in Gosnells ($330), and the Western Suburbs ($440).
Mr Bourke suggested a vacancy rate of 3 per cent for Perth Real Estate and would provide the ideal equilibrium between supply and demand.
“The current vacancy rate is therefore about 36 per cent higher than Perth’s long term average, but this can change quickly if jobs pick up strongly on the back of a resurgent resources sector,” Mr Bourke said.
In March 2007 the Perth vacancy rate plunged to just 0.8 per cent.
For more information on Perth Real Estate please visit http://www.reiwa.com.au - The Real Estate Instutitue of Western Australia.
Perth Real Estate Market Comes Back With 40 Per Cent Sales Jump In March
The Perth property market staged a strong comeback in the March quarter according to new data released today by the Real Estate Institute of Western Australia (REIWA.com.au).
According to REIWA.com.au, Perth’s median house price has increased $10,000 since December last year, raising the current median value to $430,000.
Perth Real Estate sales volumes have returned to a 15 year average following the doldrums of 2008.
REIWA President Rob Druitt said that WA’s property market experienced its strongest turnover since September 2007 with the number of sales increasing by more than 40 per cent since December.
The Federal Government’s First Home Buyer Boost has definitely been a major force in generating renewed activity, there are also indications that trade-up buyers are starting to return to the perth property market, said Mr Druitt.
Perth also recorded an increase in unit prices, lifting by just under 2 per cent to a median of $348,500.
Blocks of residential land also saw growth in the March quarter, increasing by 4.5 per cent, or $10,000, to a $230,000 median value - largely driven by the first home buyer market.
Mr Druitt claimed the turnaround in real estate sales during the quarter was astounding, with strong evidence indicating the number of property sales for March were in fact 85 per cent higher than that acheived in December last year.
The increased sales was evidenced across all market sectors, but particularly in coastal region from Scarborough to Butler and in the South East areas of Canning and Gosnells local government areas.
Much of the increase in the overall median was driven by price growth in the middle ring and coastal markets such as Wanneroo North West (5 per cent), Wanneroo South (7.6 per cent), Stirling West (4 per cent), Bayswater-Bassendean (1.9 per cent), Gosnells (3.6 per cent), and Cockburn (3.3 per cent).
In contrast, some inner markets saw a fall in prices, including the Western Suburbs (-12.5 per cent) and Vincent (-3.1 per cent), while Armadale-Serpentine on Perth’s outer fringe also fell by 2.1 per cent,Mr Druitt said.
The number of homes for sale in Perth has been progressively falling from the over-supply of March 2008. The figure dropped from 17,500 dwellings in March last year to 14,300 at the end of April.
This slide in the number of listings suggests that the excess stock built by speculators during the boom is likely to evaporate by the middle of this year, and probably triggering fresh construction, Mr Druitt said.
Perth’s rental vacancy rate has eased to 2.9 percent, a figure that historically is normal for the city. This has helped reduce pressure on rents which have been stable for the last six months, at a median price of $360 per week sfor both units and houses.
Mr Druitt said it was a similar positive story in regional WA, where house prices had also jumped by $10,000, or 2.9 per cent, in the quarter.
A typical house in regional WA will now cost you $350,000, while units in the regions have jumped by almost 7 per cent, or $20,000, to a new median of $310,000.
However, uin contrast to Perth city, land prices remained relatively stable, gaining approximately $2,000 to a median block value of $155,000, Mr Druitt said.
According to REIWA data, there were approximately 15,000 properties on the market during the March quarter, reduced from around 16,000 properties in December.
The number of selling days is steady at 76, meaning it’s taking about two and half months to sell a property in the current climate. This is 5 days more than the same time last year
However, it is a patchy market and some areas such as Armadale, Gosnells and Wanneroo South have seen selling days come down quite a bit,Mr Druitt said.
Mr Druitt said it was very hard to predict how the June quarter might fare, as the winter months were traditionally very quiet for the sector.
The Rudd Government’s extension of the first homebuyer boost through to 30 September will have an impact, as will rates of unemployment and general overall consumer sentiment.
The robustness of the current market though is still giving enthusiastic buyers a lot of opportunities to keep them very motivated, Mr Druitt said..
Rental Income Patterns - WA & Perth Rental Trends
Median rents in regional areas of Western Australia have been reasonably stable during the March 2010 quarter, however there have been some exceptions.
Regional rent figures released today by the Real Estate Institute of WA (REIWA.com.au), show the median rentals in the Pilbara region are still more than triple the price of metropolitan Perth.
Median rents in The mining areas of Port Hedland and Karratha were $1200 and $1600 per week, as reported by Alan Bourke, REIWA President.
“Karratha saw median rents increase by $200 per week during the first three months of this year, while Port Hedland saw them drop back by around $250 per week” Mr Bourke said.
Busselton was the only other region to show a sharp increase in median rents, with typical prices rising by around $20 from $280 to $300 per week during the quarter.
Most other regional centres saw a steady rental market, with places like Geraldton-Greenough, Kalgoorlie-Boulder and Greater Bunbury recording no change.
“Although the Geraldton region saw no fluctuation in its median rent, the vacancy rate of available properties did increase from 4.2 per to 5.2 per cent, a trend that may see some downwards pressure on median rents if it continues”.
“By contrast, the vacancy rate in Kalgoorlie-Boulder tightened from 5.8 to 4.6 in the March Quarter. .
If this trend is maintained, this could influence rents to increase in the medium term.
Although Bunbury showed no overall change, there was a big rise in median rentals for units, which jumped from $265 per week to $290 per week, during the March quarter.
Closer to Perth in the Peel region, Mandurah-Murray saw its median rent increase by $5 to $290 per week, while the vacancy rate dropped by 0.2 per cent to 2.3 per cent. A rate Mr Bourke described as “quite low” .
The vacancy rate in the Mandurah region has tightened considerably from the 3.7 per cent it was showing in the September quarter last year. This may be due in part, that the more affordable rents in Mandurah are attracting some Perth residents, happy to move to the seaside, and are then able to commute to Perth by train for work,” Mr Bourke said.
In Albany, the vacancy rate has grown from 3.8 per cent at the end of last year to 4.2 per cent in the March quarter. Median rents reduced by between $10 - $280 per week.
Mr Bourke said the rental system in the regions was more sensitive to employment conditions and seasonal work opportunities.
Investing In Real Estate, Perth
If you want to buy an investment property in Perth link investment property in Perth before the end of this financial year, then you better get a move on as there are just two months to go. While purchasing property should never be a rushed affair, if anybody is considering the purchase of an investment property before 30 June, then they should be sorting out their finances and looking at suitable properties now. This is particularly the case for first time investors.
Some investors might speed their purchase before 30 June 2010, simply as a strategic move so that they can claim the allowable tax deductions associated with the investment during this tax time.
Most buyers wouldn’t do that. Rushing a real estate purchase would not give the buyer enough time to research the market. Experienced investors always keep an eye on the market and give themselves time to select the best properties for their needs and budget.. Experienced real estate investors allow themselves plenty of time to select the best possible property for their needs and budget.
If you are a first time investor, then now is the time to be talking to professional financial advisers about your aspirations and the amount of money you have available to invest. Make a list of the areas you are interested in and try to inspect properties that suit your needs..
Don’t forget to include Government stamp duty into your costs.. When you sell the property in the future stamp duty along with other costs, such as agent’s fees, can be tax deductible.. The Australian Tax Office (ATO) has a great website where you can read more information about this..
People always ask me to give them a tip as to “the best place in Perth to invest.Unfortunately, there is no answer to this question.. It depends on your investment goals and budget.. Are rental returns, land prices, capital growth, development opportunities or tax deductions important to you?? How long will you keep this investment??
There is no such thing as “the best place to invest,” but, rather “the best ways to invest”.. That means getting competent financial advice from professionals to determine your budget and your loan, and then talk to some REIWA agents about opportunities in the areas that suit your portfolio plan.
A Buyer’s Agent or Advocate can help you save time and energy, especially if you want and need to purchase real estate before the end of the financial year..